Dame Colette Bowe talks on professionalism in banking

Following the publication of the report we commissioned from the University of Leeds, looking at the role of professional bodies and professionalism in banking more widely, our Chairman Dame Colette Bowe spoke at a CSFI event on 4 October on this topic.

Please find Dame Colette’s speech below:

As a forum that encourages debate and research on the fast-moving dynamics and contours of the international financial landscape, I welcome this evening as an opportunity for pause and reflection. Reflection on how that landscape is changing and how it looks to be a part of the banking industry today.

The UK banking industry has received much attention over the past few years. Looking back to the aftermath of various scandal a series of high profile conduct failures and the financial crisis, came the establishment of the Parliamentary Commission on Banking Standards (PCBS) in 2012, with a mandate to explore how professional standards and culture across the banking sector could be improved.

The Commission’s 2013 report Changing banking for good found professionalism to be lacking in the UK banking sector and highlighted this as an issue of major importance not only to individual firms and customers, but to the economy and society as a whole.

Following on from this report came a banking industry initiative and the Lambert Study, which highlighted a ‘strong case for a collective effort to raise standards of behaviour and competence in the banking sector.’ Such was the context within which the Banking Standards Board was established – a voluntary membership body, open to all banks and building societies doing business in the UK, committed to supporting industry efforts to raise such standards.

Today in 2016, one sees the enhancement of relevant regulatory frameworks to support this effort. One of the responses to the recommendations of the PCBS report has been the introduction of the Individual Accountability Regimes in March of this year, incorporating the Senior Managers Regime, the Certification Regime and the Conduct Rules. There is now a regulatory requirement for both firms and individuals to demonstrate and uphold high standards of behaviour and competence. A much needed step forward.

The Certification Regime, in particular, is analogous to some of the licensing regimes seen in other sectors, such as law or medicine. In these sectors the relevant professional body often has a role to play in issuing a ‘license to practice’ to professionals working within the sector. And yet, when the Certification Regime was introduced, no such role was given to professional bodies. Instead a gap has been left – NOT BY MISTAKE, but as a concerted decision to echo the PCBS’ stipulation that ‘the onus…[is] on the industry itself to maintain the impetus for its development’.

This gap arises as, while the regulatory framework states a number of factors against which firms must assess their employees in terms of ‘Fitness and Propriety’, it is left to the firms to detail how these factors should be assessed. There is now a real opportunity and an imperative for firms to step up their role in upholding and improving professional standards within banking.

The Banking Standards Board has been supporting its members in their efforts to address this call to action and is working to provide a platform of ideas and potential structures to enable the industry to collectively take this step forward.

As part of creating this platform, over the last few months we have been working with our members to develop high level guidelines to support firms in their assessment of Fitness and Propriety as part of the Certification regime, to encourage consistency and to inform best practice.

However, this is only part of the solution.

Another key finding from the PCBS 2013 report was that there is a crucial role to be played by professional bodies in advocating ‘a strong duty of trust, both towards clients and towards upholding the reputation of the profession as a whole’. In today’s context of the Individual Accountability Regimes, there is now a very timely and relevant question of how professional bodies can contribute to the well-functioning of the regime specifically, and their role in creating and maintaining a culture of professionalism within and across firms more broadly.

The research

To explore this idea further and with a view towards meeting the requirements of the Senior Managers and Certification Regime, last winter the Banking Standards Board commissioned the University of Leeds to conduct a series of surveys and targeted interviews with key individuals from firms, professional bodies and other interested parties.

The findings of this study are presented in a report that we published yesterday, on 3rd October. In particular, the study aimed to examine the current perception of the value of professional bodies and professional qualifications, to establish how professional bodies in the banking sector currently operate, and to explore whether, from the perspective of both firms and professional bodies, there would be value in professional bodies expanding their role and taking on a wider range of activities.

There is, of course, more to demonstrating high standards of behaviour and competence than having a qualification or being a member of a professional body; and while this research focused on professional bodies, in the sense of membership organisations open to individuals in banking, there are also a number of bodies in the banking sector that provide training (both technical and ethical) but would not think of or present themselves as professional bodies as such. Likewise, there are a number of organisations that either define behavioural standards, provide examples of good practice and otherwise influence the behaviour or competence of those working in banking such as the Chartered Banker: Professional Standards Board, FICC Markets Standards Board, regulators, trade bodies and investors.

And yet, significantly, within this context, the research found that the potential exists for professional bodies to play a significant role in raising levels of competence and ethical behaviour in the banking sector.

The challenges

However, to realise this potential the report highlighted five key challenges in particular – and I’d like to spend a few minutes exploring each in turn.

The first challenge lies in the current low profile of professional bodies in banking. The analysis indicates that despite their expansive presence, in general, professional bodies are not consistently viewed as having a valuable role and suffer from poor visibility – particularly with regards to their role in the promotion and enhancement of ethical behaviour within banking.

The second challenge relates to the lack of confidence expressed by firms regarding the relevance of qualifications provided by professional bodies. It would appear from the research that we are currently in an unsatisfactory status quo for all involved with regards to qualifications within banking. On one side of the equation, professional bodies often feel that they have to sell the very ‘idea’ of a professional qualification to firms as well as the actual qualification itself. On the other side, firms appear to be generally unaware of how many of their employees hold a professional qualification, and many do not even keep a record of the relevant figures. [1] An indication of the value, or lack thereof, that is placed on qualifications in the marketplace today.

One interviewee expressed that: ‘for leaders to see qualifications as valuable again we need to have absolute confidence in the quality of the qualification and it needs to be clear how it works and the advantages of it…until we’re completely confident that the qualification is the right one, then we won’t be making it part of the requirement to progress’.

Linked to this lack of confidence and clarity, is a third challenge: namely, the level of fragmentation that currently exists within the professional body sector. A fragmentation that relates to two aspects. First, a fragmentation in qualifications, with firms expressing difficulty in establishing a clear view of the range of qualification offerings, their relative merits and how qualifications are linked to clear career pathways and progression within the firm itself. Second, fragmentation is manifested in a perceived lack of coordination between the professional bodies themselves, with a wide variety in terms of size and sector focus.

A further complicating factor is presented by the fourth challenge: the relationship between professional bodies and firms. The research suggests that the relationship is currently skewed and imbalanced, resembling, for the most part, one of a customer and a supplier: as transactional.

The fifth and final challenge is the lack of a clearly defined role for professional bodies beyond the provision of qualifications. The evidence suggests that professional bodies in banking are trying to establish themselves in this broader role, such as in areas of continuing professional development, but are generally unsure of their wider remit of legitimate action, in terms of discipline, the oversight of ethical standards, and in providing thought leadership.

The opportunity

The Banking Standards Board facilitated an initial debate on these challenges, holding a number of discussions with those who participated in the research. These discussions built upon the discernible desire for change that one sees within the report itself, and provided yet further evidence of a momentum towards an industry-wide response to the concerns highlighted.

Throughout the analysis of the five challenges, no one definitive solution or answer is recommended. Rather, the report highlights a number of key inflection points and interconnected ideas and areas for consideration. I would now like to turn to these ideas for the remainder of my comments this evening.

Firstly, with regards to the promotion of professional standards of behaviour, participants expressed an interest in professional bodies providing a ‘second lens’ – an external point of reference from which employees can view the immediate environment of their firm, its culture, norms and the parameters of acceptable behaviour.

For professional bodies to provide such an alternative lens, a more active and dynamic dialogue is needed with their members and employers in the sector. Such a dialogue may be fostered by creating a “community of interest” in banking. A community that enables professionals from banks, building societies and professional bodies to collaborate and engage in an ongoing process of debate on industry changes and to work towards an agreed set of values and standards of behaviour, not just technical competence.

In this context, the research suggests the idea of a ‘canopy body’ within banking: a means by which to help centrally coordinate the varied contributions of this fragmented sector, to provide a mouthpiece through which to convey thought leadership on issues of professionalism and to speak with one coherent voice on behalf of the whole industry.

In the words of one interviewee, there is the need to create a ‘much stronger dialogue collectively across the banks. [To ask the key questions of] What are we here for? How is it working? What are we struggling with?’. [To create] a sense of belonging and unity that we’re doing something useful that is worth talking about, rather than being beaten by the regulator. [To] start really helping not just other banks but society in general, [creating a stronger sense] that reminds you of stewardship on behalf of society.[2]

This quote raises a salient and timely point regards the social purpose of banking – a theme that resonated during our discussions and was highlighted by the research with regards to the perceived value and quality of professional qualifications. Across the plethora of different professions that one finds within a bank or building society, from HR to accountancy, to the technical staff and the cashiers in branches across the UK, what binds all of these groups together is the fundamental fiduciary responsibility each individual has to the firm’s customers. To reinforce this sense of responsibility and ensure awareness of a firm’s broader importance to society and the economy, participants expressed a keen interest in a ‘gold standard’ qualification or a framework of qualifications to emphasise these elements. Initial ideas in the report indicate that this framework could incorporate some common generalist content, such as fundamental financial facts about how banks work and an understanding of key concepts such as risk, liquidity and how a balance sheet works, combined with a grounding in the values and principles that underpin those activities, such as the social role of banks and the responsibility to work in the public interest. Building out from this solid platform of generalist content, could then follow a process of tiered specialisation and continued professional development, to account for the nuances and complexities one sees across the multitude of roles within a firm.

Gold standard frameworks could apply to all those working in banking, whether a HR professional or a commodities trader. Understanding the specialist privileges and associated responsibilities laid upon you when working in this sector is key, even if you would first associate with a different ‘profession’.

This idea may also serve to elevate levels of confidence in the quality of qualifications, as firms can come to expect the same level of competence and understanding from existing and potential employees in a way that is consistent and enjoys industry-wide recognition. As one firm interviewee put it, knowing that there is a ‘universal understanding of the nature and context of banking, … [its] purpose in society, combined with a really thorough understanding of conduct and the responsibilities around that…could be very powerful’.

This opportunity for re-evaluation does not, however, seek to consider qualifications in isolation. Rather, it is an opportunity to strengthen and enhance the existing landscape, looking to the work of other organisations such as the Chartered Banker: Professional Standards Board, the FICC Markets Standards Board and training providers, to ensure that qualifications and standards in the banking industry are complementary and mutually reinforcing.

In this way establishing gold standards in qualification and certification, may provide a potent tool in the quest to foster a renewed sense of professional identity and pride in banking.[3]

Closing remarks

There is now a timely opportunity for the UK banking industry to signal a strong and collective will to change the status quo. In the Professionalism in Banking report, the Banking Standards Board senses a real drive and momentum towards that change. In particular, there seems to now be a real opportunity for professional bodies to take on a more expansive range of activities, to widen the definition of their role and to support the broader objective of reinstating the professionalism and trustworthiness of the banking sector as a whole.

Much of the debate over the summer about the future of financial services in the UK has focused on passporting – the right of financial service providers to sell their services into the European single market from the UK. But, at the core of the aftermath of the financial crisis is the question: what is the professional passport that people working in banking might need in order to provide services to customers and clients in the UK?

The answer to this question comes down to a number of choices. This evening I have outlined a number of areas that present some very tangible possibilities and I hope that the Banking Standards Board can continue to play a role in helping the sector make these choices.

In a similar vein to the debate, research and wealth of discussion that is generated at the CSFI, the Banking Standards Board proposes to facilitate further deliberation on these research findings by establishing a Professionalism Working Group in January 2017. In this forum, industry stakeholders will be encouraged to share thoughts and to begin to explore potential next steps, in a collaborative way that builds upon the collective will of the industry to reconnect and serve its customers, clients, staff and society.

At the Banking Standards Board, we cannot – nor do we wish to – mandate a particular course of action. But we can help the sector plot a new course.

The research has been an important step. It has identified how and why the status quo is not working for all involved. We are looking forward to working with banks, building societies, professional bodies and other interested stakeholders to see what can now be done.